Kristal Daily Market Update Mar 16

US Equities once again bucked the trend in Europe and Asia but this time they headed the other way - up. The headline index closed more than two percentage points higher with Tech leading the way.

The Energy sector continued to stall as Brent is now testing the 100 support level. Oddly, given the 20+% drawdown from its recent peak, Crude is now officially in a bear market. The situation remains volatile though and the path ahead with Ukraine remains murky as ever. While the Energy sector was down another 3% it still remains the only one that is positive on a YTD basis (+29%) with even Utilities down-0.5% YTD. HK equities were down another 5% yesterday as the market struggles to come to terms with China's renewed punitive stance on Tencent and others.

US yields were stable in this session but we did see credit spreads widen ahead of the Fed's decision tonight. The 10Y is stable around the 2.15% mark as a 25 bp hike is almost taken as a guarantee at this point. The seventh 25 bp hike for this year is now almost fully priced in as well, so Powell's words on Ukraine and inflation will be scrutinized as close as ever. On Ukraine, the US is reportedly working on another USD 1 bn aid package and Biden will join EU leaders for a NATO summit in Brussels on March 24.

Russia also has a USD coupon payment due today and Fitch announced it will declare a default if no payment is made within the 30 day grace period (any payments in RUB would not avert that). Separately, the EU has directed all three rating agencies to remove coverage of Russian sovereign and corporate debt, so that space will likely go dark for a while if the war persists.

While Putin continues to say Ukraine is not serious about halting the war, talks between the nations are reportedly improving. About 3 mn refugees (7% of Ukraine's population) have left the country and most are now in Poland. The Polish leader visited Kyiv recently, which is still being subjected to heavy shelling, and is pushing for NATO intervention in the matter - which other nations have limited appetite for barring an undeniable trigger of course. That level of escalation between nuclear-armed powers would have major repercussions globally.

In addition to the Fed tonight, we also have US Retail sales and US weekly Crude inventories, which is a data point of rising importance in the current climate.

Have a great day ahead

" The investor's chief problem, and even his worst enemy, is likely to be himself."

Benjamin Graham